SentinelOne Stock in Potential $118-Billion Market; Time to Consider Investing?

SentinelOne Stock in Potential $118-Billion Market; Time to Consider It?

S Stock Could be a Winner

As we move along in 2023, we face major macroeconomic uncertainties domestically and globally. This will likely result in continued volatility in the stock market for the foreseeable future, but patient investors could be rewarded.

Technology stocks took a beating in 2022, with the Nasdaq declining by more than 30% and recording its worst year since the subprime mortgage crisis of 2008. About 70% of the Nasdaq-listed stocks are currently below their 200-day moving averages.

It’s not going to be easy, but the market situation should improve over time.

One area of the technology stock market I continue to like is the cybersecurity space, given the domestic and foreign threats to IT systems.

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The U.S. cybersecurity market could reach $69.7 billion in 2023. It could grow at a compound annual growth rate (CAGR) of 10.1% from 2023 to 2027, resulting in a market volume of $102.3 billion by 2027. (Source: “Cybersecurity – United States,” Statista, last accessed January 10, 2023.)

This translates into mega-opportunities.

One cybersecurity stock worth watching is SentinelOne Inc (NYSE:S). The company is a mid-cap developer of solutions that employ artificial intelligence to deal with cyberattacks on networks and other critical data infrastructure.

The company prevents, detects, and deals with intrusions via an autonomous platform. (Source: “Corporate Overview,” SentinelOne Inc, last accessed January 10, 2023.)

SentinelOne stock debuted on the market at $35.00 per share in June 2021 and traded at $78.53 by November 2021. Since then, S stock has declined by a staggering 80% or so to about $14.00, where I see it as an intriguing risk/reward opportunity for risk capital investors.

Chart courtesy of StockCharts.com

SentinelOne Inc Produces High Revenue Growth

SentinelOne increased its revenues by 345% from $46.5 million in fiscal 2020 to $204.8 million in fiscal 2022. This included triple-digit-percent growth in the last two fiscal years. In the rolling 12 months to the end of the fiscal third quarter in September 2022, the company’s revenues expanded to $361.7 million.

SentinelOne Inc is expected to generate record revenue growth of 105.4% to $420.6 million in fiscal 2023 and growth of 54.7% to $650.8 million in fiscal 2024. (Source: “SentinelOne Inc. (S),” Yahoo! Finance, last accessed January 10, 2023.)

Fiscal YearRevenues (Millions)Growth
2020$46.5N/A
2021$93.1100.2%
2022$204.8120.1%

(Source: “SentinelOne Inc. ” MarketWatch, last accessed January 10, 2023.)

While SentinelOne builds its revenue base, look for the company to work on improving its earnings before interest, taxes, depreciation, and amortization (EBITDA) and move toward profitability and positive free cash flow.

Fiscal YearEBITDA (Millions)Growth
2020-$73.1N/A
2021-$109.6-49.9%
2022-$256.5-134.0%

(Source: MarketWatch, op. cit.)

On the bottom line, SentinelOne Inc is expected to narrow its generally accepted accounting principles (GAAP) diluted earnings-per-share (EPS) loss to $0.73 in fiscal 2023 and $0.50 in fiscal 2024. (Source: Yahoo! Finance, op. cit.)

Fiscal YearGAAP Diluted EPSGrowth
2020-$0.27N/A
2021-$0.41-53.6%
2022-$1.02-143.7%

(Source: MarketWatch, op. cit.)

The company has time on its side. Its healthy balance sheet comprises $701.4 million in cash from its initial product offering (IPO) and a manageable $27.7 million in debt. (Source: Yahoo! Finance, op. cit.)

Analyst Take

Institutional ownership of SentinelOne stock is high, with 346 institutions holding 84.0% of the outstanding shares of the company. (Source: Yahoo! Finance, op. cit.)

SentinelOne Inc has been ramping up its revenues and narrowing its losses. The company’s solid balance sheet will help.

Be mindful that, while S stock’s valuation continues to be high, it could be added to an investment portfolio in small tranches.